Smelter may save millions on power

Forsyth Barr analyst Damian Foster says pricing changes proposed this week by the Electricity Authority could slash around $25million from the electricity bill of Southland’s Tiwai Point aluminium smelter.

The change, if approved, would allow a ‘‘prudent discount’’ on transmission charges for businesses that can demonstrate the standalone costs of the service they receive is lower than their existing transmission charges.

Forsyth Barr’s indicative analysis suggests that in the case of the New Zealand Aluminium Smelters (NZAS), this could equate to a reduction in transmission costs to around $40million.

Last year, the NZAS paid $64million to Transpower.

Mr Foster said the analysis was based on NZAS paying for transmission lines and substations between Tiwai Point, Meridian Energy’s Manapouri power station and Contact Energy’s Clutha River power stations.

He said the two power stations provided more than enough energy to run NZAS, with combined generation having fallen below the required 622MW only about 10% of the time in the past 12 years.

‘‘’But if operated solely for NZAS, there is plenty of water.’’

Mr Foster said while the EA process was likely to take longer than Rio Tinto’s review timeline for the smelter, the proposal could be enough for a political solution, as it enables the Government to provide short-term support for NZAS linked to a potential reduction in charges.